As we navigate the early weeks of 2025, the global economic landscape remains dynamic, with key indicators offering insights into current trends and potential challenges ahead. Here’s a snapshot of the most critical data from the last week:
1. Yield Curve
- 2-Year Treasury Yield: 5.15%
- 10-Year Treasury Yield: 4.85%
The deeply inverted yield curve persists, signaling that markets remain cautious about recession risks despite robust consumer activity.
2. GDP Updates
- Q4 2024 GDP Growth: Estimated at 3.0% (annualized).
- Q1 2025 Outlook: Early forecasts suggest slowing momentum as higher borrowing costs weigh on economic activity.
3. Unemployment
- Unemployment Rate: 4.1%, slightly higher than the previous quarter.
- Wage Growth: 4.2% year-over-year, helping to offset inflationary pressures for many households.
4. Inflation
- Headline Inflation (CPI): 3.5%.
- Core Inflation (Excluding Food and Energy): 3.3%.
Persistent inflation in services continues to challenge policymakers despite improving supply chains and stable commodity prices.
5. Consumer Spending
- Retail Sales Growth: 2.7% year-over-year during the holiday season, driven by robust e-commerce performance and promotional discounts.
6. PMI Data
- Manufacturing PMI: 48.5 (Contraction).
- Services PMI: 52.3 (Expansion).
Manufacturing struggles under tighter financial conditions, while services sectors show resilience, particularly in healthcare and technology.
7. Federal Reserve Policy
- Policy Rate: Held steady at 5.5% to 5.75%.
- Future Outlook: Markets are pricing in potential rate cuts in late 2025 if economic slowing intensifies.
8. Mortgage Rates
- 30-Year Fixed Mortgage Rate: 7.5%.
Higher borrowing costs have dampened home sales, with price growth cooling across major urban centers.
9. Corporate Earnings
- Early Q1 earnings reports are mixed, with technology firms reporting moderate growth, while retail companies face margin pressures from rising labor costs.
10. Energy Prices
- Crude Oil: Averaging $82 per barrel, reflecting stable supply but heightened geopolitical risks in oil-producing regions.
Summary
The economic outlook for 2025 remains uncertain. While resilient consumer spending and wage growth offer optimism, the inverted yield curve and inflationary pressures are red flags. Policymakers and markets alike will closely monitor these trends as we move further into the year.
Stay tuned for more weekly updates on the state of the global economy!